Chapter 11

Other powers of the court under the Trustee Act

Section 72 – Payment of a commission to a trustee

(1) New legislation should retain the provision in section 72 of the Trustee Act 1956 under which the court may authorise payment of a reasonable fee or remuneration to a trustee out of trust property.(2) New legislation should retain the list of factors for determining what, if any, payment would be just and reasonable, with the factor in section 72(1A)(g) being amended so that it allows consideration of whether any payment that might otherwise have been allowed should be refused or reduced due to the conduct of the trustee in the administration of the trust.(3) Payment under this provision is one of the exceptions to a trustee’s duty to act gratuitously and the court should only authorise payment under the provision where the trustee has provided services above and beyond what would normally be expected from a trustee.

Please give us your views on this proposal.

Current law

11.13Under section 72 the court may authorise payment out of trust property of a “commission or percentage” to a trustee of an amount for the trustee’s services before, during, or on termination of the administration of the trust. When determining what payment would be just and reasonable the court must consider:281

(a) the total amount that has already been paid to any trustee of the trust, whether pursuant to the trust instrument or to any earlier order of the court or to any agreement or otherwise;(b) the amount and difficulty of the services rendered by the trustee;(c) the liabilities to which the trustee is or has been exposed, and the responsibilities imposed on him;(d) the skill and success of the trustee in administering the trust;(e) the value of the trust property;(f) the time and services reasonably required of the trustee;(g) whether any commission or percentage that might otherwise have been allowed should be refused or reduced by reason of delays in the administration of the trust that were occasioned, or that could reasonably have been prevented, by the trustee; and(h) all other circumstances that the court considers relevant.

11.14Payment of commission on the authority of the court under the section is one of the few exceptions to a trustee’s duty to act gratuitously and not profit from trusteeship.

Options for reform

11.15The courts clearly need a power to approve the payment of remuneration to trustees. However, the terminology of “commission or percentage” used in section 72 is now out of date. A replacement provision in new trusts legislation should use contemporary terminology and enable the court to approve the payment of a reasonable fee or remuneration to any trustee.

11.16The main issue that has been considered in respect of section 72 is whether the list of guiding factors should be retained.282 The options are:

(a)retaining the current list of relevant factors;(b)amending the list of factors; or(c)removing the list of relevant factors entirely.

Discussion

11.17The few submitters who addressed this particular issue all agreed that retention of an updated provision for the court to approve remuneration is desirable. They also all favoured retaining the type of non-exhaustive list of factors that should be taken into account by the court when determining whether to authorise payment to a trustee and the level of such remuneration. Although most acknowledge that the list largely states the obvious, it was thought to provide useful guidance for trustees seeking payments as well as for the court.

11.18The New Zealand Law Society (NZLS) suggested some minor changes to the list of factors. First, that (c) above should refer to the “trustee’s responsibilities” rather than those “imposed” on the trustee. Secondly, that (g) (which is aimed at reductions in remuneration) should be broadened to include factors other than delay that might warrant a reduction in the trustee’s fee. The provision should encompass a range of less than optimal conduct by a trustee, not just delay. For example, a trustee may have been negligent in dealing with part of the trust fund resulting in losses.

11.19We consider that the list of guiding factors should be retained in a replacement provision. We also consider that the minor modifications suggested by the NZLS should be made. The replacement provision for section 72 should be drafted in a manner that makes it clear that payment is an exception to the trustee’s duty to act gratuitously and that the courts will authorise payment under the provision only where the trustee has provided services above and beyond what would normally be expected from a trustee.